U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 31, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
EXCHANGE ACT
For the transition period from _____________ to ______________
Commission file number 811-0969
THE FIRST CONNECTICUT CAPITAL CORPORATION
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(EXACT NAME OF SMALL BUSINESS ISSUER AS)
(SPECIFIED IN ITS CHARTER)
CONNECTICUT 06-0759497
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(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1000 BRIDGEPORT AVENUE, SHELTON, CONNECTICUT 06484
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(203) 944-5400
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(ISSUER'S TELEPHONE NUMBER)
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(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
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Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court. Yes _____ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 1,173,382
Transitional Small Business Format: Yes No X
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PART I - FINANCIAL INFORMATION
ITEM 1. - Financial Statements
THE FIRST CONNECTICUT CAPITAL CORPORATION
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BALANCE SHEET, DECEMBER 31, 2001
(Dollars in thousands, except share data)
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(Unaudited)
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ASSETS 2001
- ------ ----
Cash and cash equivalents $13
Restricted cash 46
Loans - net of provision for loan losses of $568 2,148
Loans held for sale 1,516
Accrued interest receivable 6
Servicing rights 72
Fixed assets 18
Deferred income taxes 554
Other assets 57
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TOTAL ASSETS $4,430
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LIABILITIES AND STOCKHOLDERS' EQUITY
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LIABILITIES
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Line of credit $2,086
Accounts payable and other accrued expenses 142
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TOTAL LIABILITIES 2,228
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Commitments and contingencies
STOCKHOLDERS' EQUITY:
Common stock, no par value, stated value $.50
per share, authorized 3,000,000 shares,
issued and outstanding 1,173,382 shares 587
Additional paid in capital 9,253
Accumulated deficit (7,638)
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TOTAL STOCKHOLDERS' EQUITY 2,202
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,430
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See notes to condensed financial statements.
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THE FIRST CONNECTICUT CAPITAL CORPORATION
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STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2001 AND 2000
(Dollars in thousands, except share data)
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(Unaudited)
- ----------- Three Months Nine Months Three Months Nine Months
------------ ----------- ------------ -----------
Ended Ended Ended Ended
Dec. 31, 2001 Dec. 31,2001 Dec. 31, 2000 Dec. 31, 2000
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INTEREST INCOME:
Interest and fees on loans $138 $453 $130 $409
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INTEREST EXPENSE:
Interest expense on line of credit 57 180 54 130
Other interest expense 4 11 3 11
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TOTAL INTEREST EXPENSE 61 191 57 141
NET INTEREST INCOME 77 262 73 268
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Recovery on provision for loan losses net (28) (16) - -
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NET INTEREST INCOME AFTER RECOVERY OF
PROVISION FOR LOAN LOSSES 105 278 73 268
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OTHER OPERATING INCOME:
Servicing fees 121 372 89 257
Other fees 5 22 7 22
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Total other operating income 126 394 96 279
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TOTAL INCOME 231 672 169 547
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OTHER OPERATING EXPENSES:
Officers' salaries 46 133 44 115
Other salaries 16 41 14 32
Directors' fees - 1 - 1
Professional services 89 99 8 23
Collection expenses (11) (1) - 0
Miscellaneous taxes 3 13 4 11
Employee and general insurance 11 32 11 33
Rent 7 23 7 23
Amortization of servicng rights - - (4) 8
Corporate insurance expenses 5 15 5 16
Licenses, dues and subscriptions expenses 2 5 1 4
Communications 2 7 3 8
Advertising and promotions 2 4 1 3
Stock record and other financial expenses 3 9 4 12
Depreciation 1 3 2 7
Equipment and auto rental 4 11 3 9
Postage expenses 0 5 2 4
Office supplies 4 6 - 3
Other 5 12 11 17
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Total other operating expenses 189 418 116 329
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INCOME BEFORE INCOME TAX (PROVISION) BENEFIT 42 254 53 218
INCOME TAX (PROVISION) BENEFIT - (10) 11 42
NET INCOME $42 $244 $64 $260
=========== ========== ========== ===========
INCOME PER COMMON SHARE (BASIC AND DILUTED) $0.04 $0.21 $0.05 $0.22
=========== ========== ========== ===========
Weighted average number of
common shares outstanding: basic 1,173,382 1,173,382 1,173,382 1,173,382
=========== ========== ========== ===========
common shares outstanding: diluted) 1,181,296 1,180,416 1,173,382 1,173,382
=========== ========== ========== ===========
See notes to condensed financial statements.
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THE FIRST CONNECTICUT CAPITAL CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED DECEMBER 31, 2001
(Dollars in thousands, except share data)
(Unaudited)
Common Stock Total
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Number Of Additional Accumulated Stockholders'
Shares Amount Paid-In Capital Deficit Equity
------ ------ ---------------- -------- ------
BALANCE, April 1, 2001 1,173,382 $587 $9,253 ($7,882) $1,958
Net Loss 244 244
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BALANCE, December 31, 2001 1,173,382 $587 $9,253 ($7,638) $2,202
=========== ========= ========== ============= =============
See notes to condensed financial statements.
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THE FIRST CONNECTICUT CAPITAL CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 2001 AND 2000
(Dollars in thousands)
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(Unaudited)
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2001 2000
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OPERATING ACTIVITIES
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Net income $244 $260
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Recover of provision for loan losses (16)
Deferred taxes - (60)
Depreciation 3 7
Amortization of servicing rights - 8
Origination of loans held for sale (12,826) (9,520)
Proceeds from sales of loans held for sale 12,273 9,091
Changes in assets and liabilities:
Increase in restricted cash (2) (1)
Increase in accrued interest receivable (2) (2)
Increase in other assets (9) (10)
Increase in accounts payable and other accrued expenses 112 1
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Net cash used in operating activities (223) (226)
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INVESTING ACTIVITIES
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Principal collected on loans 244 186
Purchase of fixed assets (6) (5)
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Net cash provided by investing activities 238 181
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FINANCING ACTIVITIES
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Decrease in line of credit borrowings (234) (167)
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Net cash used in financing activities (234) (167)
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DECREASE IN CASH AND CASH EQUIVALENTS (219) (212)
CASH AND CASH EQUIVALENTS, BEGINNING 232 327
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CASH AND CASH EQUIVALENTS, ENDING $13 $115
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See notes to condensed financial statements.
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THE FIRST CONNECTICUT CAPITAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements of The
First Connecticut Capital Corporation (the "Corporation"), formerly known as The
First Connecticut Small Business Investment Company, have been prepared in
accordance with accounting principles generally accepted in the United States of
America ("GAAP") for interim financial information and with the instructions to
Form 10-QSB and Article 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and notes required by GAAP for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair representation have been
included. Operating results are not necessarily indicative of the results that
may be expected for the year ending March 31, 2002. For further information,
refer to the financial statements and notes thereto included in the
Corporation's Annual Report on Form 10-KSB/A for the year ended March 31, 2001.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Corporation is currently licensed in the state of Connecticut to
operate as Mortgage Lender/Broker.
The Corporation had net income of $244,000 for the nine months ended
December 31, 2001 as compared to the net income of $260,000 for the nine months
ended December 31, 2000. This decrease of $16,000 is due to the increase of
$115,000 in the collection of servicing fees and the increase of $44,000 of
interest and fees earned on loans. This was offset by an increase of $50,000 of
interest paid on the line of credit, the increase of $18,000 in officers'
salaries and the increase of $76,000 in professional fees due to the
professional cost incurred by the Corporation to assist the Corporation in
maximizing shareholder value.
INTEREST INCOME AND OTHER OPERATING INCOME
Interest and fees on loans increased $44,000 for the nine months
ended December 31, 2001, as compared to the nine months ended December 31, 2000.
This increase was primarily due to an increase in the number of mortgage loans
originated and funded by the Corporation. Management attributes the increase to
its successful marketing of its knowledge of construction and real estate
lending, its ability to service loan demand from homebuilders, remodelers and
developers and the generally favorable climate for the construction industries.
We continue to provide construction financing to a segment of the market whose
price range is less affected by economic conditions.
Servicing fees increased by $115,000 for the nine months ended
December 31, 2001, as compared to the same period in the prior year. This
increase is due to an increase in servicing fees earned on the Corporation's
short-term construction and remodeling mortgage loans, the increase in the
Limited Partnership portfolios and the decrease of the interest rate paid on the
Corporation's line of credit.
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THE FIRST CONNECTICUT CAPITAL CORPORATION
OTHER OPERATING EXPENSE
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Total other operating expenses increased by $89,000 during the nine
months ended December 31, 2001, as compared to the comparable period of the
prior year. This increase is due to the increase of $76,000 in professional
services, an increase of $27,000 in officers' salaries, and other salaries,
offset by the decrease of $5,000 in other operating cost and the $8,000
amortization of servicing rights record in the prior year.
INCOME TAX PROVISION (BENEFIT)
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A net income tax provision of $10,000 was recorded for the nine
months ended December 31, 2001, as compared to $42,000 tax benefit for the nine
months ended December 31, 2000, which primarily reflects the current provision
and the reduction of the valuation allowance against net operating loss
carryforwards (NOLS), based on management's assessment of the amount of NOLS
that will more likely than not be realized based on current and projected
profitability.
PROVISION FOR LOAN LOSSES
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The Corporation for the nine months ended December 31, 2001 has
recorded a recovery of $16,000 on the provision for loan losses, due to the
payoff of a loan previously included in the provision. There was no such
recovery recorded for the nine months ended December 31, 2001.
PLAN OF OPERATION
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The Corporation is engaged in the mortgage banking business, which
involves the origination, purchase, sale and servicing of mortgage loans
collateralized by residential properties and commercial real estate. These loans
are predominately collateralized by first mortgage liens on residential
properties and are sold to qualified investors, with origination and servicing
fees retained by the Corporation. The Corporation's revenues consist of loan
servicing fees, loan origination fees, interest on mortgage loans and mortgage
servicing rights.
Attractive long-term mortgage rates are expected to encourage more
spec building, which should result in increased construction loan demand. Based
upon the continuing favorable climate in the construction industry in
Connecticut, the Corporation will expect to increase its present level of
activities in this area. Management is cognizant that residential construction
is seasonal in nature, as well as sensitive to changing interest rates. Loan
demand, in general however, remains steady and despite the lowest rates in
years, the Corporation has been able to maintain its current rate schedule.
We continue to experience "repeat business" from our growing list of
contractors/borrowers primarily due to our streamlined application and closing
process. We continue to provide prompt, professional and personalized service
which is extremely attractive, as well as unique, in today's lending
environment.
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THE FIRST CONNECTICUT CAPITAL CORPORATION
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The Letter of Intent filed on December 5, 2001 with The Security and
Exchange Commission has been terminated. The Corporation continues to seek ways
to reduce expenses while at the same time increase market activity of its
products and services. Management is continuing to actively pursue strategic
acquisitions or mergers of other finance companies in order to implement its
business plan. The Corporation has also engaged the service of an investment
advisor to assist in maximizing stockholders value. In connection with the
above, certain members of the Corporation's management (including certain
members of the board of directors) have indicated they may be interested in
purchasing the operating assets of the Corporation. The Board of Directors has
indicated that it would consider such a proposal when and if specific proposed
terms and conditions are present.
LINE OF CREDIT
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On December 15, 2000 the Corporation closed its third Commercial Line
of Credit with Hudson United Bank. This $3,000,000 line of credit is for a term
of one year at an interest rate of 2.5% over the Wall Street Prime Rate and will
expire on December 1, 2001. The line of credit agreement has been extended to
April 1, 2002, and the Corporation is currently in negotiations with the bank
and renewal is expected by the end of February 2002. This line is collateralized
by an assignment of notes and mortgages equal to the amount of the loan. At
December 31, 2001, and December 31, 2000 there was $2,086,000 and $1,551,000
advanced on this line of credit, respectively. The Corporation is hopeful that
this established long-term conventional banking relationship will continue to
grow and enable the Corporation to increase its volume of business.
FINANCIAL RESOURCES
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As of December 31, 2001, the Corporation had $13,000 of unrestricted
cash and cash equivalents and approximately $2,202,000 of Stockholders' Equity.
The Corporation currently anticipates that during the year ending
March 31, 2002, its principal financing needs will consist of funding its
mortgage loans held for sale and the ongoing net cost of mortgage loan
originations. The Corporation believes that cash on hand, internally generated
funds and availability of its line of credit will be sufficient to meet its
corporate, general and administrative working capital and other cash
requirements during the year ending March 31, 2002.
Future cash flow requirements will depend primarily on the level of the
Corporation's activities in originating and selling mortgage loans, as well as
cash flow required by its operations. If construction loan demand increases, the
Corporation will require additional cash to service those requirements. The
Corporation continues to monitor its cash flow requirements. Due to the
aforementioned line of credit, the Corporation feels it will be able to meet
these cash requirements. The Corporation also continues to decrease its cash
flow requirements by monitoring all expenses.
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THE FIRST CONNECTICUT CAPITAL CORPORATION
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Form 8K filed December 5, 2001
Form 8K filed February 11, 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
THE FIRST CONNECTICUT CAPITAL
CORPORATION
(Registrant)
Date: February 12,2001 By: _________________________________
Lawrence R. Yurdin
President
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